Many of the homes hit by floods in NSW and Queensland are still not covered by insurance, despite claims by government and the insurers’ peak body that the level of cover has significantly improved.

Insurance executives concede the high cost of obtaining insurance – above $20,000 a year for people in flood-prone areas – means a large proportion of people are simply ­­un­able to afford cover.

Data from Allianz Insurance shows that over 95 per cent of its Queensland and NSW customers whose homes are considered most at risk of flooding are choosing to opt out from taking flood insurance.

“While flood cover is widely avail­able, those that need it most can generally not afford it," Allianz spokesman Nicholas Scofield said.

Mark Milliner, chief executive of personal insurance at
Suncorp
, said non-insurance was still a serious ­problem and he hit out at local governments for allowing houses to be built on flood plains.

“The cause of all this isn’t insurance companies rating a property accurately and giving it a higher premium," he said. “The cause of the higher premiums are the councils ­letting the houses get built in the first place."

Floodwaters retreating

Floodwaters are now retreating in Brisbane after inundating more than 3000 properties and are expected to peak in northern NSW today. Four lives have so far been lost. In Queensland alone some 100,000 homes were without power. There have been 9800 insurance claims costing $116 million in Queensland so far, while in NSW there have been 2000 claims costing $10 million.

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According to the Insurance Council of Australia, 81 per cent of policies purchased by late 2011 included flood cover, up from just 3 per cent in 2006. Following the 2011 floods Financial Services Minister
Bill Shorten
pushed insurers to make flood insurance more available and on Monday he applauded the insurance industry’s response.

“Because of all the arguments, debates, and indeed eventually positive change from the industry, 81 per cent of people have flood insurance now. Now, again, that might not be in the most flood-prone areas. It’s an average, but there’s a much greater coverage against flood, and we have one definition across all policies now, he told ABC radio. But insurance executives say privately that extending cover has been easy because over 90 per cent of homes are at virtually no flood risk. Those who have no cover tend to be those who need it most. The issue was examined under a National Disaster Insurance Review which made a series of recommendations following the 2011 floods.

John Trowbridge
, who headed the review, said flood insurance remained prohibitively expensive for many. The federal government is yet to respond to his recommendation that it bear part of the cost of providing cover to existing flood-prone houses.

One in four ‘without cover’

“We regard it as a legacy problem," he said. “[It’s to] deal with the people who are already in flood-prone areas as a result of land opening up in the past that probably shouldn’t have been . . .We believed there was a problem that should be dealt with and what we’re experiencing now is why."

One insurance executive who declined to be named estimated one in four victims of the current flood would not have insurance, although he added this was a very rough estimate. Fifteen months have passed since the NDIR recommended a publicly funded reinsurance pool.

A spokeswoman for Mr Shorten said that that recommendation was “currently being considered".

Such a pool could cost the government dearly if there are further floods. Had it been in place during the 2011 floods, the bill would have been about $1 billion. While Allianz supports a government reinsurance pool,
Suncorp
and
IAG
argue governments should instead spend more to flood-proof areas.

Chief executive of the Insurance Council of Australia, Robert Whelan, said that in many cases flood-prone areas in NSW had done more to mitigate against flooding than high risk areas in Queensland.

Seeney defends measures

“If you look at some of the flood prone area in Queensland, which have had huge flooding in recent years, ­little by way of mitigation has occurred, and that ultimately gets reflected in the premiums," he said.

All levels of government could have done more to prepare for flooding through measures such as levees, barrages and weirs, he said.

“You can’t mitigate every risk, but you can certainly reduce repetitive and predictable risk."

The Queensland government yesterday hit back at the claims.

“For the [ICA] to insinuate flood mitigation measures could have prevented such significant impacts in many of these areas is absurd and irresponsible," said Deputy Premier
Jeff Seeney
.“The focus of industry and government should be on dealing with the current crisis, not on playing games." He said the Newman government had allocated $40 million over four years for the Floodplain Security Scheme.